Lehman (LEH): Another Financial CEO In Trouble (C)(MER)(WB)

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After indicating that the worst was behind it, Lehman (LEH) may have to raise another $3.4 billion. That would be an indication that the brokerage will lose much more than expected in the second quarter. It also puts CEO Richard Fuld in a group which includes the heads of Wachovia (WB), Merrill Lynch (MER), and Citigroup (C). His board can no longer protected him from a series of bad decisions which have driven down the LEAH stock and started rumors that the company is in deep trouble.

"Lehman still has a lot of exposure to the mortgage market, and they are going to need capital to get through it," said BUS analyst Glenn Score, The Wall Street Journal reports.

Lehman shares dropped sharply in March when they hit a 52-week low. The stock fell below $32. Comments from management about the health of the company and a potential end of the credit crisis helped move the shares back up to over almost $50. Over the last week or so, analysts have downgraded the stock and its has fallen again.

The fact that Lehman will have to raise money certainly will make investors doubt that the firm has any grasp of the gravity of its troubles. Stockholders face another 20% dilution and that may not be the end of it. There is no guarantee that Lehman will recover in the last two quarters of the year.

Fuld and his board bought time with a thin optimism which is now gone. Fuld will be gone with it.

Douglas A. McIntyre